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CA Intermediate · Auditing and Ethics · Audit Documentation

Rao & Associates audited Deccan Steels Ltd. During the audit, the engagement team identified a significant matter: the management's going concern assessment relied on a promoter's verbal assurance of funding. The team discussed it with the engagement partner and the management and concluded that a written confirmation from the promoter was needed, which was obtained a week after the report date. The senior asks how to document the matter. Which response is correct as per SA 230?

The auditor should document the significant matter, the discussions with management and the engagement partner, and the conclusions reached. Any confirmation received after the report date must be recorded as an addition showing the reasons, date, who made it and the reviewer. A bare conclusion or reliance on the representation letter is insufficient.

  1. ADo not document, because the discussion was oral and the matter was resolved
  2. BDocument only the final conclusion, without the discussions or the information obtained
  3. CDocument significant matters, the discussions with management and others, and the conclusions, including how any inconsistent information was addressed, and treat the post-report-date confirmation as a documentation addition with date and reasons if it was obtained after the report dateCorrect
  4. DPlace the matter only in the management representation letter

Explanation

SA 230 requires documentation of significant matters arising, the conclusions reached, and significant professional judgments, including discussions with management and others on the nature and timing. Information obtained after the report date that affects documentation must be recorded with the reasons, date and person involved. A bare conclusion or the representation letter alone does not meet this.

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